Principle 1 - How we discharge our stewardship responsibilities
Our Environmental, Social & Governance (ESG) Investment Principles and Policy Guidelines are reviewed annually by the ESG team and approved by our Board when any significant change has occurred. These guidelines provide us with a flexible but robust framework to guide our investment team in fulfilling our stewardship responsibilities. The Guidelines can be found here and include our views on such matters as company constitution, board composition, values and business practices, remuneration, accountability and audit, and voting. At the heart of the Guidelines is a commitment to act always in the best interests of our clients.
When we decide to engage with companies from an Environmental and Social perspective we consider the ten principles of the United Nations Global Compact. We expect investee companies to meet fundamental responsibilities in the areas of human rights, labour, environment and anti-corruption.
Our investment teams use best endeavours to have an influential and supportive relationship with investee companies. Hence, a regular dialogue is maintained with the senior management of investee companies. This enables us to monitor the company's progress and prospects. In addition we engage systematically with the boards – generally the chairman - and company secretaries of investee companies. This enables us to improve our understanding of how the board is fulfilling its responsibilities and to communicate views constructively, as and when appropriate. In doing so we take care to give due consideration to explanations made by companies in relation to the UK Corporate Governance Code. See Principle 3 for more information.
We vote our clients' shares using our Global Voting Platform. Voting policy is determined by reference to our Guidelines. We undertake our own analysis of resolutions being considered at AGMs and other shareholder meetings of most of our UK investee companies. When we vote against a resolution at a UK company meeting we use best endeavours to explain to the company our reasons for this decision. In exceptional circumstances, we shall attend and speak at shareholder meetings to reinforce our views to the company's board. See Principle 6 for more information.
For other companies - mainly overseas - we use the services of a voting advisory agency, with whom we have a contractual relationship. The agency adapts their standard voting policies to take account of relevant provisions in our Guidelines in forming a custom policy. Resolutions which have recommendations to vote against management are referred to the ESG Investment team for review. According to the size of our holding, we may undertake further analysis to assure ourselves that the recommendation is consistent with the best long term interests of our clients.
From time to time we have significant disagreements with our investee companies on matters relating to stewardship and ESG factors. The basis for such disagreements and our strategy for resolving them is generally the subject of discussion and agreement by our ESG Investment and portfolio management teams. In exceptional situations, our Chief Executive is involved as well. The strategy is determined on a case-by-case basis. If we decide to intervene we generally do so through private engagement with the company and, if appropriate, its advisers. However if circumstances dictate we make our views known publicly. See Principle 4 for more information.
We integrate stewardship and ESG factors in our wider investment processes. In particular this is done by identifying those companies that we believe carry a higher than usual stewardship and ESG risk to inform our portfolio managers’ decisions in our stock selection process. In addition, our portfolio managers and our ESG Investment team engage in regular dialogue during the course of a working day on stewardship issues, which helps to ensure a timely two-way flow of relevant insights and views, thereby enabling effective and considered intervention when necessary.
As a UK domiciled asset manager we are signatories to the UK Stewardship Code. However, we use best endeavours to apply the UK standards to our global investments. In addition, we are signatories to the Principles for Responsible Investment (PRI) and we apply those principles to our global investments.
The PRI works to understand the investment implications of ESG factors and to support its international network of investor signatories in incorporating these factors into their investment and ownership decisions. In applying this approach, we believe that the company can demonstrate that we would meet comparable codes around the world.
On Monday the 14th of August 2017 Standard Life plc. and Aberdeen Asset Management plc. completed their merger in order to form Standard Life Aberdeen plc. A combined approach to stewardship will be developed during the integration process.